• Vertex Technology Acquisition Corporation (VTAC) has announced a proposed business combination with live streaming platform 17LIVE Inc. According to Frost & Sullivan, 17LIVE operates the top pure-play live streaming platform in Japan with a market share by revenue of 20.8% for 2022 and a market share by revenue of 26.9% in Taiwan for 2022.
   
• Some drivers of the interactive video streaming platform market include widespread availability of affordable internet, the advancement of mobile payment, growing disposable income and spending in Southeast Asia, as well as the culture of fandom in Japan and growing popularity of v-livers. Frost & Sullivan also estimates the market for V-Livers in Japan to grow at a CAGR of 41.2% from 2023 to 2027 to reach US$3.9 billion in revenue.
   
• There are a total of 3 SPACs listed in Singapore – Vertex Technology Acquisition Corporation (VTAC) SPAC, Pegasus Asia SPAC, and Novo Tellus Alpha Acquisition (NTAA) SPAC.
   

Recap of VTAC SPAC – Unlocking potential of Technology investment

Vertex Technology Acquisition Corporation (VTAC) is the first special purpose acquisition company (SPAC) to be listed in Singapore in Jan 2022. It’s Sponsor, Vertex Venture Holdings, is a Singapore-based global venture capital platform with over US$5.1 billion AUM.

In its IPO prospectus published back in Jan 2022, VTAC disclosed that it intends to acquire or merge with one or more business that may display the following characteristics: 1) technology-driven, 2) fast-growing and scalable, 3) at an inflection point of their growth journey, 4) strong management team, 5) cross-border potential with market leadership, and 6) appropriate valuation. The businesses will together have an aggregate fair market value of ≥80% of the asset value held in the escrow account.

VTAC has announced a proposed business combination with live streaming platform 17LIVE Inc. which is the top pure-play live streaming platform in Japan and Taiwan by revenue – read the Circular.

Overview of the media & entertainment industry with a focus on the interactive video streaming platform, v-liver and live commerce industries (see page 8 for the independent market research by Frost & Sullivan)

• Live online social entertainment – Refers to platforms that allow users to broadcast live video content through the internet, with the inclusion of more social elements and diversified monetisation methods. It can be further sub-divided into 2 categories: 1) interactive video streaming (e.g. 17LIVE, Lang Live, Bigo Live, Showroom and Pococha) and 2) video game streaming (e.g. Twitch, Caffeine, Mobcrush).
• Some key drivers of the interactive video streaming platform market include widespread availability of affordable internet, the advancement of mobile payment, growing disposable income and spending in Southeast Asia, improvements in the quality of live streaming due to technological advancements, increasing variety of entertainment programmes and better interactive video streaming platforms, as well as the culture of fandom in Japan and growing popularity of v-livers.
• Virtual streamers (Vtubers) have become a prominent phenomenon in the streaming industry. Frost & Sullivan believes that as this trend continues to gain traction, virtual streamers are likely to become more prevalent in Taiwan and Japan, attracting a dedicated fan base and potentially leading to developments in the industry.
• Highlights of key markets
  • Japan – Nearly half of Japanese netizens watch live stream videos and is most popular among ages 20 and 30. The interactive video streaming market in Japan is about US$1.8 billion in 2022 and has grown at a CAGR of 53.6% from 2018 to 2022, and is expected to continue to grow at a CAGR of 22.0% from 2023 to 2027.
  • Taiwan – 77% of Taiwanese internet users watch live streams during their time on the internet and live streaming is most popular among ages 15-19 and 35-39. The interactive video streaming market registered a CAGR of 17.7% from 2018 to 2022 reaching a size of US$322.7 million in 2022, and is expected to continue to grow at a CAGR of 11.2% from 2023 to 2027.
  • Southeast Asia (SEA) – Interactive video streaming market grew at a CAGR of 42.4% from 2018 to 2022, recording revenues of US$953.6 million in 2022, and is expected to continue to grow at a CAGR of 19.2% from 2023 to 2027.

Proposed Target Group 17LIVE’s Business Overview and Prospects (Read the Circular here)

• Operates the top pure-play live streaming platform in Japan with a market share by revenue of 20.8% for 2022 and a market share by revenue of 26.9% in Taiwan for 2022, according to Frost & Sullivan.
• Key operating metrics (monthly average for 1H FY2023)
  • ~550,000 monthly active users (MAU)
  • 16.1% spenders as a percentage of MAU (spend rate)
  • US$302 average revenue per spending user (ARPPU)
  • ~87,000 contracted streamers
• 2 main core offerings to engage its user community through:
  • Diversified live streaming content offerings including localized content and exclusive premium content across a wide range of categories
  • Immersive online and offline experiences forge a vibrant and local live social community

• Business prospects include diversified growth drivers (i.e. V-Liver, live commerce, in-app games), multiple monetisation strategies (i.e. virtual gifting and subscriptions, sale of in-game virtual items). 17LIVE plans to expand its business in SEA by utilising its content to build a critical mass of users, making its Japan V-Liver content available in other countries, and acquiring more live streamers and users by collaborating with media and entertainment companies.
• More about V-Livers (virtual idols either based on AI or personified by individuals behind avatars)
  • Frost & Sullivan estimates the market for V-Livers in Japan to grow at a CAGR of 41.2% from 2023 to 2027 to reach US$3.9 billion in revenue
  • 17LIVE adopts a hybrid approach to support its own V-Liver proprietary IPs and organic V-Livers
  • 17LIVE’s fan community has grown 2.1x year-on-year to ~75k average V-Liver

Risk Factors (refer to page 156 of the Circular for full list)

• If the Target Group (17LIVE) fails to retain its existing users, keep them engaged or grow the user base.
• If the Target Group fails to attract, cultivate, manage and retain its popular live streamers or V-Livers or if the content created becomes less engaging to the users.
• The Target Group’s business is based on a business model where user demand may change or decrease substantially, and may not be able to successfully implement its monetisation strategies to generated sustainable revenue and profits.
• The unique community culture of the users, live streamers and V-Livers of the Target Group is vital to its success. Its operations may be materially affected if it fails to maintain its culture with its addressable user, live streamer and V-Liver communities.

Financials

• In FY2022, 17LIVE generated revenue of US$363.7 million, loss of US$51.0 million in overall profit, and adjusted EBITDA of US$15.9 million. In its 1H FY2023 unaudited results, revenue was US$151.0 million, loss of US$118.2 million, and adjusted EBITDA of US$15.7 million.
• 17LIVE’s operating revenue for 1H FY2023 decreased by 24.7% year-on-year, mainly attributable to the decrease in Liver live streaming revenues. Cost of revenue decreased by 34.8% year-on-year which was primarily attributable to a decrease in revenue sharing fees and live streaming costs due to a decrease in the number of contracted monthly active streamer as a result of the ease of COVID-19 restrictions.
• Operating revenue by business segments (FY2022) – Liver Live Streaming (97.5%), V-Liver Live Streaming (0.9%), and Other Businesses (1.7%).
• The Target Group do not have a fixed dividend policy and has not declared or paid any dividends in the last three financial years.

Key Terms of the Proposed Business Combination

• Purchase consideration of up to S$922.9 million consisting of:
  1. S$800.8 million consideration shares; and
  2. up to S$122.0 million earnout shares subject to financial targets for earnout being achieved.
• Special bonus shares – The Company shall allot and issue 0.1 new Shares to:
  1. Non-Redeeming Shareholders for every existing Share held as at the Redemption Record Date;
  2. PIPE Investors for every Base PIPE Share subscribed.
• Total equity value of enlarged group post completion of up to S$996.9 to S$1,159.7 million – consisting of:
  1. purchase consideration (up to S$922.9 million);
  2. escrow amount (S$60.0 to S$208.0 million);
  3. PIPE financing (S$10.0 million for illustrative purposes only); and
  4. special bonus scheme (S$4.0 to S$18.8 million).

Note: “Non-Redeeming Shareholders” refers to existing Shareholders (other than Vertex SPV) who hold Shares as at the Redemption Record Date and who will be entitled to the Special Bonus NRS Shares and the Additional Warrants based on the Shares held as at the Redemption Record Date.

Key dates that investors should take note of

Source: Shareholder Circular

3 SGX-Listed SPACs

There are 3 SPACs listed in Singapore – Vertex Technology Acquisition Corporation (VTAC) SPAC, Pegasus Asia SPAC, and Novo Tellus Alpha Acquisition (NTAA) SPAC.

Pegasus Asia, backed by experienced sponsors (Tikehau Capital, Financière Agache, Diego De Giorgi and Jean-Pierre Mustier), seeks to search for businesses in Technology-enabled sectors to deploy patient capital and operational support, driving transformative impact and value creation.

NTAA’s Sponsor, Novo Tellus PE Fund 2, L.P. (principal fund of Sponsor Group) was established to make private equity investments in Technology and Industrials sectors (SPAC’s target sector) in the Indo-Pacific region. NTAA offers investors a distinctive opportunity to invest alongside them in opportunities at forefront of technology transformation

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